Imported Scrap offers exhibit improvement in recent days owing to rising Sponge Iron (C-DRI) prices in domestic market.
The rise in imported Scrap offers is not taking a halt, from past 2-month; while finding the reason, rapid rise in production & capacities of few primary steel plants in FY15 is the main factor that became the chief of all drawing the need of Sponge & Scrap. Shortage of Scrap in market coupled with high Sponge iron prices tramped the Scrap offers also.
India, which is the largest producer of Sponge iron with an annual production of 23 MnT, has noticed a price hike of INR 1,000/MT (around USD 16/MT) in last one week’s time. Current C-DRI prices in Indian market are hovering at USD 330-370/MT on Ex-Works basis. This sudden rise in Sponge price is compelling steel mills to consume more of Scrap. India produces 78 MnT of crude steel, out of which 25 % is being contributed through Sponge iron.
Appreciated INR supports Scrap Imports
Indian currency which has strengthened to 59-60 levels against USD has supported import of Scrap. Indian importers are frequently booking order to Middle East nations looking to the urgency of Scrap requirement (due to steady rise in finished production all over India). Current offers from Middle East flowing to India are in the range of USD 385-388/MT CFR.
Offers for HMS 1&2 in the range of USD 385-386/MT CFR were heard even a week before, but people were not accepting those prices. But, owing to sudden rise in demand now, importers have started trading at these levels.
“Current offers for HMS 1&2 from Middle East are at USD 385-386/MT CFR Mumbai, which costs us around INR 25,800/MT delivered plant against domestic offers of INR 26,200/MT for almost same grade of Scrap. If Sponge iron prices continue to remain stable, Scrap offers are bound to go up further”, said a smelter based in Mumbai.
Dubai is currently offering HMS 1 at USD 405/MT CFR India, but the buyers are not able to absorb the level and have quoted USD 402/MT CFR. Market participants believe offers are expected to rise further by the end of this month, assessing the shortage of Scrap in market.
[su_pullquote]A buyer based at Ludhiana (the highest imported Scrap consuming city) shared that he procured Scrap from Dubai at various prices. Ranges depend upon the GI & CI content.
* HMS at USD 375/MT with GI & CI content more than 12%
* HMS at USD 385/MT with GI & CI content up 10%
* HMS at USD 392/MT with GI & CI content up 3%
* HMS at USD 400/MT with no GI & CI content (0%)[/su_pullquote]
US is offering HMS at around USD 395-397/MT CFR Chennai, but no trade has been heard at these levels as the traders believe it’s too high level at this juncture for Scrap.
Another feasible priority becoming for Indian importer is booking Scrap from Africa which is currently offering HMS 1 at USD 380-382/MT CFR Chennai.
Recent Deals
A deal of 8 containers (200 MT) of HMS 1&2 from Dubai was settled yesterday at USD 386/MT CFR Mumbai.
Another, deal of 500 MT of HMS 1&2 was closed by an Aurangabad buyer from the same origin (Dubai) at USD 388/ MT CFR Mumbai.
Graph below demonstrates the rapid rise in Sponge Iron Prices
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